Europe shares inch higher on prospect of U.S. debt deal

PARIS, Oct 11 European stocks inched up in early
trade on Friday, extending the previous day's rally, as
investors waited to see if an agreement will be reached in
Washington on the U.S. debt ceiling.

At 0740 GMT, the FTSEurofirst 300 index of top
European shares was up 0.16 percent at 1,247.09 points, after
gaining 1.7 percent on Thursday.

The euro zone's blue-chip Euro STOXX 50 index
was down 0.08 percent at 2,967.06 points, hovering just below a
2-1/2 year high hit earlier in the session.

Stocks around the world had lost ground in the past three
weeks after a deadlock in budget talks led to a partial shutdown
of the U.S. government and sparked worries about negotiations on
the country's debt ceiling.

On Thursday, President Barack Obama and Republican leaders
appeared ready to end the deadlock after meeting at the White
House, and talks continued into the night with one senior
Republican saying an agreement could come on Friday.

"Even though investors get nervous when political tensions
rise, the backdrop for equities remains quite positive: very
accommodative central banks, improvement on the macro front, and
relatively good corporate fundamentals," said Jeanne
Asseraf-Bitton, head of global cross asset research at Lyxor
Asset Management, which has $98 billion under management.

"It's sort of a 'sweet spot' for stocks. Now, with the
earnings season set to start, we need to see an improvement in
the earnings momentum. It has improved lately in Europe,
although it remains negative for now."

French hotel group Accor topped the FTSEurofirst
300 leader board, with a 2.5 percent rise after investment bank
Citigroup's upgraded the stock to a "buy".

Darren Courtney-Cook, head of trading at Central Markets
Investment Management, said even a short-term extension to the
U.S. debt limit would be enough to soothe investors' nerves.

"Even if they just kick the can down the road again, the
fact that there won't be a default is why the markets would take
it so positively. There may be some volatility going up to the
wire, but most people expect a year-end rally," he said.

Dec 8 Time Inc, the publisher of Time,
People and Fortune magazines, has tapped Morgan Stanley
and Bank of America Corp to help field takeover or
partnership interest, the Wall Street Journal reported.

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